Zynga owes IBM $45M after using 1980’s patented technology for hit games

Zynga must pay IBM nearly $45 million in damages after a court ruled that its popular games FarmVille series, as well as individual hits like Harry Potter: Puzzles and Spells, violated IBM’s first two patents.

In the SEC report, Zynga assured investors that “the copyrights have expired and Zynga will not have to change or stop working on any of the games involved” because of the loss. But the huge damages owed could have financial implications for Zynga’s parent company Take-Two Interactive Software, analysts said, unless Zynga is successful in its plans to overturn the ruling.

A spokesperson for Take-Two told Ars: “We are disappointed by the ruling; however, we believe we will win the appeal.”

For IBM, the victory comes after a decade of failed efforts to stop what it said was Zynga’s willful infringement of its copyrights.

In court filings, IBM told the court that it first notified Zynga of the alleged infringement in 2014, explaining how its games used patented technology dating back to the the 1980s when IBM launched Prodigy.

But instead of negotiating with IBM, like tech giants Amazon, Apple, Google and Facebook, Zynga is said to have shied away from accountability, delaying negotiations and making excuses to postpone meetings for years. At the time, IBM said that instead of ending the infringement or licensing IBM’s technology, Zynga “expanded its infringement action” after admitting ” low” to IBM that “a lawsuit would be the only way” to end it.

This left IBM “with no choice but to seek judicial relief,” IBM told the court.

IBM argued that its patent, which was originally used to launch Prodigy, is still “the basis of effective Internet communication.” Known as the ‘849 patent, that patent proposed “new methods of presenting applications and advertisements in a shared service that will take advantage of the computing power of a personal computer (PC) and thereby reduce the need for host servers, such as those used by Prodigy,” which made it “more efficient than conventional methods.”

According to IBM’s complaint, “Using the processing and storage capabilities of the user’s PC, applications could be created on the fly from objects stored locally on the PC, reducing reliance on the Prodigy server and online resources.”

The court found that Zynga infringed that patent, as well as the ‘719 patent designed to “improve the performance” of Internet devices by “reducing the delay in network communication.” That patent describes technology that improves device performance by “reducing the number of interactions required between the client and the server,” IBM’s complaint said, and makes it easier to develop and improve applications.

The company told the court that licensing this early technology helps support the company’s innovation today.

As of 2022, IBM has confirmed that it has spent “billions of dollars on research and development” and that the company is carefully guarding those investments as it discovers new entrants like Zynga seem to want to avoid those R&D costs using IBM’s new technologies feed billions of dollars. with revenue without paying IBM license fees.

“IBM’s technology is a key driver of Zynga’s success,” IBM argued in 2022, and on Friday, the court agreed.

“IBM is pleased with the court’s decision upholding Zynga’s infringement of IBM’s copyright,” an IBM spokesperson told Ars.

The cost of the first IBM Internet license

In its defense, Zynga tried and failed to argue that the patents were invalid, including challenging the validity of the 1980s patent—which Zynga said was never valid. should not be given, he said it was because of “the intention to deceive” the patent office by withholding information. .

It is currently unclear what license agreement IBM had originally awarded to Zynga or how much Zynga would have paid to avoid the damages awarded this week. IBM did not respond to Ars’ request for more details about the failed deal.

But the patent of the 1980s in particular has been the focus of several lawsuits that IBM has brought to protect its original intellectual property from abuse by Internet companies. Back in 2006, when IBM sued Amazon, IBM CEO John Kelly vowed to defend the company’s copyrights “by all means available.” IBM followed through on that promise throughout the 2010s, receiving notable settlements from a variety of companies, such as Priceline and Twitter, where the terms of subsequent licensing deals were not met. presented.

However, IBM’s aggressive defense of its early Internet rights has not killed every Internet company. While Chewy pressed charges of patent infringement against IBM in 2021, the pet retailer was able to defeat IBM’s claims by proving in 2022 that its platform was not infringing, Reuters reported .

With that case, the public got a rare look at how IBM values ​​its patents, trying to get Chewy to agree to pay $36 million to license its technology before suing. seeking at least $83 million in damages for the violation. Ultimately, Chewy was right to refuse to license the technology to avoid a court battle.

Now that some of IBM’s early patents have lapsed, IBM’s licensing machine may begin to slow down.

For Zynga, the costs of fighting IBM have so far not restricted access to its games or forced Zynga to redesign its platform to avoid infringement, the remedies sought. in IBM’s first prayer for relief in the case. But overturning the court’s order to avoid paying millions in damages may be a more difficult hurdle, as the jury rejected what might be Zynga’s best defense, and the facts of the court and the unalterable judgment is always guaranteed.

According to Take-Two’s SEC filing, the jury was wrong, and Take-Two plans to testify: “Zynga believes this decision is not supported by the facts and the law and intends to seek to overturn the verdict and reduce or to terminate. destroys the award through post-trial proceedings and appeals.”

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